Believe it: Blockbuster was once an e-commerce hot shot

It may be hard to remember now, but way back when—that is, 2005—Blockbuster was the rising star of U.S. e-commerce.

The retail chain’s start-up online movie rental business earned $146.7 million that year, up 1,605.8% from 2004. That made Blockbuster the fastest-growing retailer in Internet Retailer’s Top 500 Guide.

Now the chain, No. 147 in this year’s Top 500, stands as an example of how the web destroyed the corner video store.

Blockbuster yesterday said it would close its remaining 300 U.S. stores, shutters it distribution centers and cease its mailed DVD business.

“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” says Joseph P. Clayton, president and CEO of DISH Network Corp., which bought the chain in 2011. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”

The demise of Blockbuster comes amid the rise of Netflix Inc. and its streaming video service, bolstered by original content. Netflix revenue hit $1.106 billion in Q3, up 22.2% year over year. Netflix, No. 9 in this year’s Top 500, increased its worldwide membership by about 37% year over year in the third quarter to 40.28 million subscribers. It also won three Emmy awards this year for its original political thriller “House of Cards.”

Netflix is hardly alone in serving streamed content to consumers. Amazon.com Inc., No. 1 in the Top 500, provides streaming videos through Amazon Instant Video and its Prime membership program. And streaming video web site Hulu LLC is No. 92 in the Top 500.

Blockbuster these days might seem as relevant as the once titanic soft-rock band Air Supply from a generation or so ago—hey kids, feel free to look that one up—but along the way, the chain did have its moments of glory:

• Earlier this year, it announced the latest fruit of its investment in mobile commerce via the release of a new Blockbuster Android app that, in the words of the company, “allows users to browse a catalog of more than 100,000 movie and game titles.” As recently as late October, Blockbuster beat other large retailers for providing the best mobile performance, according to data provided to Internet Retailer by Compuware.

• The chain achieved its high-water mark in e-commerce­—at least from the Internet Retailer perspective—in 2010, when it ranked No. 34 in the Top 500 Guide (the ranking is based on 2009 sales data). In 2009, Blockbuster’s web sales hit $552.7 million, up nearly 5% from $526.4 million the year before. In 2010, those sales reached $569.3 million, a 3% year-over-year increase. Then things declined before inching up again: $136.5 million worth of web sales in 2011, followed by $151.2 million in 2012, a 10.8% increase.